Saudi Arabia will provide a $240 million loan to co-finance Pakistan’s multi-purpose Mohmand dam project, a major hydro-power complex being built in northwest of the country, statements from both sides said on Friday.

The project will “contribute to Pakistan’s energy security, increase sustainable water supply for agriculture and human consumption and improve resilience to floods,” Pakistan’s economic affairs ministry said in a statement.

Saudi state news agency issued the same statement in Arabic.

“The Saudi Fund for Development (SFD) has signed a $240 million loan agreement,” the statements said.

For Pakistan, the funding will help to boost critically low foreign exchange reserves as it faces an acute balance of payment crisis, as well as helping to address the energy needs of the 220-million strong nation.

Co-financed by the SFD, the Organization of the Petroleum Exporting Countries, the Islamic Development Bank, and the Kuwait Fund for Arab Economic Development, the project will use renewable sources to generate 800 megawats of electricity production capacity, contributing to Pakistan’s energy security, the ministry said.

The water storage will also support sustainable agricultural practices to enable irrigation of 6,773 hectares of land, and increase the total cropping area from 1,517 hectares to 9,227 hectares in the northwestern region, the agreement said.

The SFD has financed around 41 development projects and programmes in Pakistan, amounting to approximately $1.4 billion, the statements said, adding it has also financed oil derivatives worth more than $5.4 billion between 2019 and 2023 to support Pakistan’s economy.

Pakistan has a mix of mostly thermal and hydro power generation capacity, which is theoretically adequate, but the country has insufficient funds to use the capacity to the full, which has resulted in hours-long black-outs, especially when energy demand is high in summer.